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British Energy Companies May Shut Down Power Plants To Receive Subsidies

Tim Webb, The Times

The boss of one of Britain’s biggest energy companies has warned that the Government’s new plan to stave off the growing threat of blackouts could increase the risk of the lights going out.

Under the plan announced this month, the owners of mothballed power plants would be offered lucrative subsidies to rush them back into action during times of peak demand.

But Keith Anderson, the chief corporate officer of Scottish Power, said that energy companies could deliberately mothball plants that they would otherwise have kept open to make them eligible for the payments. This would cut Britain’s precariously thin spare generating margin even further.

“Please let’s not create the wrong signals in the market,” he said. “If you put in place a mechanism to encourage mothballed plants to come back on the system, then you are encouraging people to mothball plants. You have to think through very carefully the consequences. We need to have more detailed conversations to make sure we do not have unintended consequences and make the situation worse.”

Other power companies share Scottish Power’s concerns. National Grid, which is carrying out a consulation into the plan, admitted that many believed it amounted to “interference” in the market.

Mr Anderson wants the Government instead to bring forward its so-called capacity auctions, scheduled to start in 2018, which will pay energy companies to provide generating capacity available a long time in advance.

Ofgem recently warned that within two years, Britain’s spare generating margin could fall from 14 per cent today to as low as 2 per cent. This means that if one large plant, such as a nuclear reactor, unexpectedly shuts down, emergency action will be needed to avert power cuts.

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